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“… the best path to economic development and rising living standards is the one paved with economic freedom.”
– Mary Anastasia O’Grady, Wall Street Journal
Hot off the presses is the 2004 “Index of Economic Freedom,” published jointly by The Heritage Foundation and The Wall Street Journal.
The “Index” is a country-by-country report on the openness of economies worldwide, and measures each nation in 10 categories – trade policy, fiscal burden of government, government intervention in the economy, monetary policy, capital flows and foreign investment, banking and finance, wages and prices, property rights, regulation and informal (or black) market activity.
After a decade of producing the “Index,” a central theme resounds: Countries with greater economic freedom enjoy higher standards of living and higher per capita income than do other nations.
This year alone, The Heritage Foundation has invested nearly 40,000 man-hours to produce the “Index of Economic Freedom” and will fly halfway around the world in two directions – to Asia and Latin America – to deliver it. Why? And why has the world’s most respected newspaper, The Wall Street Journal, dedicated significant resources to developing and promoting a way to measure economic freedom?
Because economic freedom matters in the lives of real people, in every country, around the globe.
Statistics reveal that when countries provide greater economic freedom for those who live inside their borders, those individuals wind up with more money to control. But this is not merely about statistics, it’s about the way those funds affect the lives of the men, women and children who have them.
Greater prosperity means mothers and fathers have more money to put shoes on the feet and food in the stomachs of their children. It means better access to health care. Personal prosperity means more educational opportunities. It means hard-working men and women get to keep more from the toil of their hands and the sweat of their brow. It means parents can plan a better future for their children.
People around the world share these opportunities and values. As different as our customs and lifestyles may be, parents in every nation want to provide the best they can for their children. It’s what unites parents everywhere, and it is this value and vision that keeps The Heritage Foundation and The Wall Street Journal committed to raising the world’s awareness of how each country enables their own people to better their lives.
Ed Feulner, editor of the “Index” – along with Heritage analyst Marc Miles and WSJ editor Mary O’Grady – sounds a warning in the preface to the 2004 “Index”:
The benefits of economic freedom are obvious, yet many governments continue to stifle their economies by implementing unsound policies. Obstacles in the form of domestic politics often prevent leaders from taking the actions needed to encourage a climate of economic freedom and overall prosperity. Both developed and developing countries fall into the trap of choosing what is easy over what is economically sound.
Dr. Feulner points out how America has often pursued a “counterproductive approach, both by subsidizing farmers and by protecting items such as sugar with high tariffs. These policies punish the average citizen with higher prices and impede competition.”
Indeed, although United States ranks No. 10 on the list, and is described by “Index” editors as “one of the world’s freest and most vibrant economies,” if the vision of our Founding Fathers was reflected in more of our economic policies, certainly we could outrank more of the nine in front of us:
Hong Kong, for the 10th straight year, rates first in economic freedom, followed by Singapore, New Zealand, Luxembourg, Ireland, Estonia, United Kingdom, Denmark, and Switzerland.
A Jan. 9 editorial in The Wall Street Journal correctly points out the link between economic liberty and political liberty, and how Beijing’s recent decisions to slow the “pace of democratic reform in Hong Kong and perhaps abandon it altogether” will certainly result in a plummeting of the region’s rank in future issues of the “Index.”
Some people are surprised to see countries such as Ireland and Estonia ahead of the United States. But why shouldn’t they be there? Ireland has transformed itself. Its 12.5 percent corporate tax rate is less than half the 30 percent average found among other European Union nations. As a result, the editors say, it’s a major center for U.S. investment in Europe. Estonia, meanwhile, has steadily opened its economy since the Soviet Union broke up in 1991, and today enjoys the distinction of being one of Europe’s freest economies.
But no matter what continent you’re on, the key is freedom. Let’s hope more world leaders will take it in hand – and unlock their citizens’ potential by unleashing the world’s economies.
Editor’s note: The 2004 “Index of Economic Freedom” can be accessed in its entirety online. Additionally, the 428-page book can be ordered online for $24.95 or by calling The Wall Street Journal at 1-800-975-8625.